Fintech Jitters, PE’s Foothold, Crypto No War-Funder? (Future of Finance | Week in Review)

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation. 

Whoops: Perhaps Tens of Millions of Crypto Didn’t Fund Terrorism

What happened: A number of media outlets (this one included) amplified a story suggesting that the terrorist attack by Hama in Israel on October 7th was largely funded by crypto. That may now be wrong.

Why it matters: It is not hard to parody or put down crypto. Often the people within the industry do it best. It is important, however, to get the facts straight. Overattributing crypto’s role in financing, and by extension facilitating, horrific terrorism does no one any good.

What’s next: Unfortunately, because of the very technical response required to rebut what is a very emotional claim, we’ll likely see a lot more bad reporting on crypto very soon. (By Chainalysis Team, Chainalysis)

Chill Out, Europe Isn’t Going to Destroy Payments

What happened: A negative earnings report from a single, small-ish payments company based in Europe has wreaked havoc on the entire sector.

Why it matters: With everyone still jittery from possible recession talk, Paris-listed Worldline SA saying it’s seeing softening business in Germany was enough to wipe tens of billions off the market cap of companies like PayPal, Block, and Visa. Yet those companies don’t have nearly the exposure to Europe as does Worldline, and none of them are reporting anything close to the same results.

What’s next: Every payments investor analyzing other Q3 reporting for signs of the same. (By Emily Bary, Marketwatch)

The Alternative Asset Landing In More Retirement Accounts

What happened: Private equity is getting access to the mass affluent, a group usually off limits, because so many employees are converting from 401ks to IRAs, which provide a lot more leeway for alternative investments.

Why it matters: Risk! Equities and bonds are far from risk-less, but KKR & Co. trying to put together a massive infrastructure deal is a completely different ballgame than a 60/40 allocation. 

What’s next: So many boomers are going to be so tempted by the allure of private equity simply because it’s gonna be fun to say they’ve got a little piece of some esoteric product their friends can’t buy. (By Miles Weiss, Bloomberg)

U.S. Is the Top Fintech Country In the World and It’s Not Particularly Close

What happened: Whether measured by market cap or sheer number of top companies, the U.S. is far and away the biggest country in the world in terms of domestic fintech production. China is close by some measures, but with some major caveats.

Why it matters: There’s a general perception that China is far ahead of the U.S. in terms of consumer adoption of fintechs. There’s plenty of truth in that, but it’s less about the pervasiveness of its fintechs and more about its relatively less scaled-up banking industry. China is also far more top-heavy, where the U.S. has 65 fintech unicorns compared to China’s eight.

What’s next: The race for number two might be the most interesting, with the U.K. edging out India despite a perception that the island nations have an unfriendly regulatory environment. (By Ryan Browne, CNBC)

China Taketh, the Federal Reserve Giveth Even More

What happened: Chinese regulators made noise earlier this year by banning two trading apps that allowed mainland citizens to buy and sell foreign-listed stocks. Yet both have seen their own market caps soar since.

Why it matters: A precipitous drop in trading volume was more than made up for by higher revenue, largely due to an ability to earn interest on client funds. Life is even better for these two particular companies, too, since rates in their home country, Hong Kong, have soared even higher than rates stateside.

What’s next: There may be a path to survival for lots of online brokerages and other financial startups dependent on China. Whether that path is always clear is another matter. (By Elaine Yu, The Wall Street Journal)